The Small Business Reorganization Act (SBRA), also known as “Subchapter V” of the Bankruptcy Code, went into effect on Feb. 19, 2020. See 11 U.S.C. §1181 et seq. The SBRA is one of the most significant changes to the Bankruptcy Code since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The SBRA provides relief for small businesses looking to reorganize—for whom the traditional Chapter 11 process had been inaccessible due to the high costs associated with it—resulting in liquidations and business closings where they may have otherwise benefitted from the bankruptcy process. The SBRA’s main purpose is to provide a streamlined and cost-effective reorganization process for the “small business debtor,” which is defined as a person or entity engaged in business activities with aggregate debts under $7,500,000 (increased from $2,725,625 by the CARES Act), at least 50% of which arose from the debtor’s business activities.

Since its effective date, courts have been tasked with analyzing and interpreting the SBRA. This article highlights some recent decisions regarding the SBRA, including: (i) eligibility requirements; (ii) electing treatment under the SBRA; and (iii) considerations during the Plan confirmation process.

SBRA Eligibility